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Amazon scraps plans for dozens of new warehouses as sales slump

By Nithya Bose in US business news, posted September 5, 2022

Amazon has canceled plans to build dozens of warehouses throughout the United States due to poor sales growth.

According to the consulting firm MWPVL, Jeff Bezos' giant company has either closed or abandoned plans to open 42 warehouses totaling nearly 25 million square feet of functional space.

The research shows the firm has postponed the launch of 21 new locations comprising almost 28 million square feet.

MWPVL states Amazon has also terminated a number of European operations, particularly in Spain.

It has also recently informed Maryland officials of its intentions to shut two delivery stations in Hanover and Essex, near Baltimore, next month, employing over 500 workers.

The closures are in stark contrast to previous years when Amazon had been rushing to set up new warehouses to prepare for the busy holiday season.

However, Amazon is still building new facilities in areas where it needs to fulfill high customer demand.

MWPVL’s founder Marc Wulfraat said: “There remains some serious cutting to do before year-end -- in North America and the rest of the world.”

“Having said this, they continue to go live with new facilities this year at an astonishing pace.”

Maria Boschetti, an Amazon spokesperson, said the company frequently explores numerous locations at once and makes modifications "based on needs across the network."

She said: “We weigh a variety of factors when deciding where to develop future sites to best serve customers.

“We have dozens of fulfillment centers, sortation centers and delivery stations under construction and evolving around the world.”

The Maryland closures are part of an attempt to transfer labor to more contemporary facilities, Amazon says.

Boschetti said: “We regularly look at how we can improve the experience for our employees, partners, drivers and customers, and that includes upgrading our facilities.”

“As part of that effort, we’ll be closing our delivery stations in Hanover and Essex and offering all employees the opportunity to transfer to several different delivery stations close by.”

CEO Andy Jassy has vowed to unwind a portion of Amazon's pandemic-era expansion, which has left the company with an excess of warehouse space and workers.

The company has cut down its ranks of hourly workers by eliminating open positions, halting hiring, and raising disciplinary or productivity measures.

Amazon's workforce decreased by 100,000 positions in the second quarter, to 1.52 million, the worst quarter-to-quarter reduction in the company's history.

The Seattle-based corporation is also looking to sublease at least 10 million square feet of warehouse space.

Locked-down shoppers flocked to Amazon during the Covid-19 pandemic, which led to the company responded by doubling the capacity of its logistics network in two years.

This quick expansion outpaced rivals and partners such as Walmart, United Parcel Service, and FedEx.

For a period Amazon was opening a new facility somewhere in the United States every 24 hours.

In June, Jassy said the business has opted in early 2021 to build at the high end of its shopper demand forecasts, to have more warehouse space rather than too little.

Wulfraat said the majority of the closures reported this year are delivery stations, which are smaller buildings that hand off already packaged goods to drivers.

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Several proposed fulfillment hubs and massive warehouses housing millions of items have been scrapped.

MWPVL estimates that Amazon maintains over 1,200 logistics facilities, both large and small, across the country.

Source: Bloomberg

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